Benson Company has operating assets of $20,500,000. The companys operating income for the most recent...
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Benson Company has operating assets of $ The companys operating income for the most recent accounting period was $ The Dannica Division of Benson controls $ of the companys assets and earned $ of its operating income. Bensons desired ROI is percent. Benson has $ of additional funds to invest. The manager of the Dannica division believes that his division could earn $ on the additional funds. The highest investment opportunity to any of the companys other divisions is percent.
Required
Calculate the ROI of Dannica Division.
Before investment opportunity.
Only on the new investment opportunity.
Dannica total ROI if investment opportunity is accepted.
Calculate the Dannica Division residual income from the new investment opportunity. If residual income is used as the sole performance measure, would the manager of the Dannica Division be likely to accept or reject the additional funding?
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